It was meant to be one of the biggest Chinese investments in the Czech Republic. Now a deal giving the Chinese energy giant CEFC a 50 percent stake in the financial company J&T Finance Group looks highly uncertain as do CEFC’s other activities in the country. The company is reported to be in financial straits and its CEO under arrest for economic crime.

CEFC’s investments in the Czech Republic were the toast of Czech-Chinese negotiations following a restart in bilateral relations. President Zeman hailed the fact that CEFC made the Czech Republic its European “headquarters” as a major success in his economic diplomacy drive and he appointed the company’s CEO Ye Jianming his special advisor for China.

In late February South China Morning Post reported that the company’s CEO had been arrested on suspicion of economic crime and the management of CEFC China Energy had been taken over by the state agency Shanghai Guosheng Group. Although the company denied the reports and the news was not officially confirmed by the Chinese authorities, a delegation of Czech state officials which travelled to China to ascertain the state of affairs said it had received confirmation of these developments.

The news has inevitably raised concern among the Czech businesses which have deals with CEFC and its activities in this country are extensive. The company has assets worth 1.5 billion euros in the Czech Republic.

J&T Finance Group has demanded an explanation saying that unless CEFC reliably disproves reports of major economic problems and explains the reasons for the alleged prosecution of its senior official, the completion of the long-prepared transaction for CEFC’s entry to the J&T Finance Group would not take place. Monika Vesela is spokeswoman for the group.

“J&T Finance Group last week officially asked CEFC’s leading representatives for a clear, official stand on the claims that have appeared both in the local and foreign press these past few weeks.”

J&T did not provide further details, but according to the news site Echo.24 the Czech National Bank earlier this year refused to approve the transaction under which CEFC would raise its share in the Czech-Slovak J&T Finance Group from 9.9 to 50 percent, a deal worth 25 billion crowns.

The Czech shareholders in Travel Service airlines are asking to buy back CEFC’s share in the company, and the firm’s other partners are increasingly nervous as well. CEFC has shares in the travel agency Invia.cz, it is in control of the Lobkowicz Group breweries, the engineering and metallurgical company Žďas Žďár nad Sázavou and is a majority shareholder of the Slavia football team and football stadium EDEN Arena.

On Monday the Reuters news agency reported that in the second half of last year CEFC had approached shadow bankers for costly short-term loans and appeared willing to pay annual rates of as much as 36 percent for short-term funding – a sign it was in a cash crunch.

The Office of the President, where Ye Jianming is still officially registered as the president’s advisor for China is tight-lipped. The president’s spokesman said Mr. Zeman had received the Chinese ambassador to Prague to discuss the situation, but provided no output from the meeting.